US charges Coinbase a day after suing crypto exchange Binance
Shares of Coinbase have fallen 15.9 percent in pre-market trading and investors have pulled around $790 million from Binance and its US affiliate after both lawsuits were filed.
The lawsuits fan concerns about the future of the crypto industry, which faces an uphill task of regaining favour among retail investors. / Photo: Reuters
The US Securities and Exchange Commission (SEC) has sued Coinbase Inc, the largest US crypto asset trading platform, accusing it of illegally operating without having first registered with the regulator.
In a complaint filed in Manhattan federal court on Tuesday, the SEC said Coinbase has since at least 2019 operated as an unregistered broker by handling cryptocurrency transactions, evading the disclosure requirements meant to protect investors.
The SEC also said Coinbase operated as an unregistered broker through Coinbase Prime, which routes orders to Coinbase's platform and other platforms, and Coinbase Wallet, which lets investors access liquidity outside Coinbase's platform.
"Coinbase's alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection," SEC Chair Gary Gensler tweeted.
Shares of Coinbase fell 15.9 percent in pre-market trading after the lawsuit was filed. Coinbase did not immediately respond to a request for comment.
The SEC sued Coinbase one day after the regulator sued Binance, the world's largest cryptocurrency exchange, and its founder Changpeng Zhao.
Binance, US affiliate hit by $790M outflow
The US Securities and Exchange Commission on Monday sued crypto exchange Binance, its CEO Changpeng Zhao and the operator of its US affiliate Binance.US over what it called a "web of deception" to evade US laws.
Following the filed lawsuit, investors have pulled around $790 million from Binance and Binance.US in the last 24 hours, data firm Nansen has said.
Binance saw net outflows of $778.6 million of crypto tokens on the Ethereum blockchain, with its US affiliate, Binance.US, registering net outflows of $13 million, Nansen tweeted.
Neither exchange immediately responded to a request for comment.
The SEC alleged in 13 charges that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict US customers from its platform and misled investors about its market surveillance controls.
The lawsuit, which cited a number of practices first reported by Reuters in a series of investigations into the exchange, marks the most significant step against a crypto company by the SEC in its sweeping crackdown on the industry this year.
In statements on Monday, Binance said it had been co-operating with the SEC's probes and had "worked hard to answer their questions and address their concerns", including by trying to reach a negotiated settlement. "We intend to defend our platform vigorously," it said in a blog.
Crypto blow
Bitcoin steadied after falling more than 5 percent yesterday, its worst daily decline since April 19. The world's biggest cryptocurrency was last at $25,723, flat on the day but pinned near a more than two-month low.
"It's another blow to the crypto industry and the crypto exchanges of the world," said Tony Sycamore, market analyst at IG Markets, of the SEC suit.
Binance's BNB cryptocurrency, the world's fourth-largest, fell 0.3 percent to a near three-month low of $277, after a 9.2 percent plunge on Monday, its worst daily fall since November.
The SEC complaint is the latest in a series of legal headaches for Binance.
The company was sued by the US Commodity Futures Trading Commission (CFTC) in March for operating what it alleged were an "illegal" exchange and a "sham" compliance program.
Zhao said the CFTC claims were an "incomplete recitation of facts."
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